write-offs

Defying predictions of widespread bankruptcies and credit defaults, the U.S. exploration and production companies (E&Ps) we track returned to profitability in 2017 through a strategic transformation that featured the “high-grading” of portfolios, impressive capital discipline and an intense focus on operational efficiencies.  However, the road to recovery has been longer and more challenging for some companies, particularly a few of the E&Ps in our Diversified Peer Group, whose output and reserves are more balanced between oil and gas. Their portfolio realignments have been the biggest among our three peer groups — collectively they have shed $36 billion in assets and 3.6 billion barrels of oil equivalent (boe) in proved reserves over the last three years. Today, we continue our review of how rebounding oil prices are affecting E&P cash flow, this time focusing on producers with a rough balance of oil and natural gas assets.

How a company or industry handles adversity is a valuable test of its mettle. But assessing long-term sustainability requires a second test: handling prosperity. Recently released 2017 results of U.S. exploration and production (E&P) companies confirm that the industry not only defied predictions of widespread bankruptcies and credit defaults after the oil price plunge in late 2014, but learned to generate profits in a $50/bbl crude oil price world. And the E&Ps’ 2018 guidance, issued as oil prices appear to have stabilized above $60/bbl, indicate that the industry is sticking with the new financial discipline that drove its recovery, a remarkable departure from the financial profligacy in the emergence from down cycles over the previous three decades. Today, we examine how 44 large U.S. E&Ps are responding to a rebounding oil sector.